EVs are getting interesting. With the Nissan Leaf this year, Ford planning to release its Focus EV in 2011, and the Honda Fit EV scheduled for 2012, the 100 mile range EV class will provide consumers with several choices within a couple of years.
So it’s time to take a look at whether EVs are a good deal for consumers. It took a bit work to analyze but the results were worth it. The initial step is to review the key drivers affecting consumer economics.
First is upfront cost for the EV, the charging station, and the incentives being offered. The EV costs more, even after vehicle and charging station incentives. I estimate the additional cost at $7,334 for a Nissan Leaf versus a basic Toyota Camry.
Second is annual cost. A Camry gets 24.5 EPA miles per gallon. A Nissan Leaf, by my estimate, will get about 3 miles per kWh. So what matters is how much a driver drives and the cost of electricity. The average driver drives 15,000 miles per year, or 41 miles per day, which should be reasonably feasible in an EV.
Electric costs are a big factor. Retail rates nationwide are something like 11 cents/kWh. In high cost states like California, without time-of-use metering, costs are 15 cents/kWh and higher. I’m a SMUD customer with an old meter. I’m into Tier 2 consumption and if I charged up tonight it would cost me 17.55 cent per kWh. But wholesale, nighttime rates are dramatically lower. One wholesale electric price forecasting company that serves electric traders shared their outlook for the next 12 months with me:
Quarterly forecast prepared 12/3/2010, Off-peak prices
period NP15 (Northern California)
2010-4 3.3 cents/kWh
2011-1 2.7 cents/kWh
2011-2 2.2 cents/kWh
2011-3 3.3 cents/kWh
These prices may seem amazingly low but they are, in fact, realistic. Thanks to the shale boom natural gas is being delivered to power plants for $4.40 per mmBtu. And the power plants setting prices throughout the western US are modern combined cycle units with heatrates around 7,200 Btu/kWh. (4.40 * 7200 / 1000 = 3.2 cent/kWh). In Northern California alone on Dec 3 there are over 4,000 unload MW of these plants. That’s enough to charge 1.3 million EVs consuming 3 kW each.
Tying the analysis together I computed the IRR of owning an EV under three scenarios.
- In scenario 1 my utility is serious about promoting EVs and they flow cheap nighttime power to me at a 5 cent/kWh rate. They can do this with their new smart meters; at night they have plenty of distribution capacity; and they would make some money.
- In Scenario 2 I pay roughly the national average for power, say 11 cents/kWh.
- In Scenario 3 my utility does nothing and I have to pay Tier 2 rates — 17.55 cents/kWh.
I computed when I break-even, or when my fuel savings equal the extra cost of the EV, and my IRR, or the return on my initial investment after I’ve driven 105,000 miles (this is 7 years at 15,000 miles per year). The results are presented below:
Scenario Break-even years IRR at 105,000 miles
1 (5 cent/kWh) 3.9 17 %
2 (11 cent/kWh) 4.8 11%
3 (17.6 cent/kWh) 6.2 3%
At a 17% return the EV option is pretty compelling and my local utility can make it happen, if they really want clean energy technology.
At the national average rate 11% isn’t bad, and early adopters may find EVs attactive.
And under my current personal rate schedule, EVs aren’t interesting.
That said, with a bit of creative utility rates, and leveraging the big smart meter investments being made, EV can be a hit. And if they are a hit car companies with early products, like Nissan, GM, and Ford can pick up market share.
At the national level this makes great sense. Every EV driven will displace over 600 gallons of gasoline per year, virtually all of which is produced from imported oil. This reduces our balance of payments and trade deficits and improves our security situation. Maybe a higher federal incentive would be cost effective and should be pursued?
Credits: Price forecast and electric data courtesy of Plexos Solutions LLC and its weccterm forcast.